Almost a year after it expired, the Building and Construction Trades Council and the Real Estate Board of New York (REBNY) reached an agreement to restore the 421-a tax exemption program. The New York State legislature still has to approve the agreement.

The new agreement will require developers to pay construction workers an average hourly wage of $60 (including wages and benefits) for projects in Manhattan with over 300 units south of 96th Street. In Brooklyn and Queens, the average hourly rate for workers, including wages and benefits, will be $45, and the wage and benefit obligations will apply to buildings located in Community Boards 1 and 2 within one mile of the nearest waterfront bulkhead. Projects with 50 percent or more affordable apartments are excluded from the wage and benefits requirement.

The agreement will also extend the maximum time developers will pay zero in property tax with the 421-a program from 21 years to 35 years. In exchange, affordable apartments with rent limitations must remain that way an additional 5 years to 40 years.

To assure compliance with the wage and benefits obligation of the program, developers will have to hire independent monitors to audit certified payrolls. The independent monitors will certify to the New York City Department of Housing Preservation and Development within 120 days of the receipt of the final Certificate of Occupancy that the compulsory wages and benefits have been paid.

Under the new agreement, developers may opt out of the 421-a wage and benefits requirement by entering into a Project Labor Agreement (PLA). If a developer chooses to enter into a PLA, the developer can still take advantage of all other elements of the 421-a program.

“The deal reached today between these parties provides more affordability for tenants and fairer wages for workers than under the original proposal. While I would prefer even more affordability in the 421-a program, this agreement marks a major step forward for New Yorkers,” Governor Andrew Cuomo said in a statement.

Rob Speyer, chair of REBNY, said: “We are pleased to have reached an agreement that will permit the production of new rental housing in New York City, including a substantial share of affordable units, while also ensuring good wages for construction workers.”

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and of the Duane Morris Cuba Business Group. Mr. Aquino focuses his practice on commercial litigation with a concentration in construction law, mechanics’ lien law and government procurement law. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

Effective December 1, 2015, the Commercial Division of the Supreme Court of the State of New York, County of New York amended its rules. First, home improvement construction contract disputes (one to four family homes or individual units in any residential building including cooperatives and condominiums ) will not be heard by the Commercial Division irrespective of the dispute involving $500,000 or more. Second, the Commercial Division will hear, pursuant to article 75 of New York’s Civil Practice Law and Rules, applications to stay or compel arbitration and to affirm or disaffirm awards and injunctive relief irrespective of the $500,000 monetary threshold provided the arbitration agreement requires the arbitration to be heard outside the United States.

The impact of these amendments will be to eliminate access to the Commercial Division for owners and contractors among others where the dispute involves a home improvement contract. At the same time, the Commercial Division will open its doors to arbitration proceedings conducted outside the United States thereby affording parties access to a specialized court in Manhattan. Parties are still free to agree in their arbitration agreements where issues related to arbitration will be heard. If the parties provide for these issues to be heard in New York County, then the Commercial Division will be available to them.

Construction contracts in New York and in other states frequently include provisions that bar recovery of damages for delay and require extra work to be authorized in writing. These types of provisions are enforceable. Exceptions exist that will permit recovery of delay damages and for extra work in the face of these exculpatory provisions. In Bricklayers Ins. & Welfare Fund v. Minhas Gen. Contrs. Co., LLC, 2015 U.S. Dist. LEXIS 151965, Judge Frederic Block sitting in the United States District Court for the Eastern District of New York, denied summary judgment finding triable issues of material fact. Subcontractors and general contractors have limited leverage to remove these types of provisions from the contract. Nonetheless, review of project records by a knowledgeable attorney may well reveal facts to overcome these provisions.

Duane Morris is pleased to announce that partner Allen J. Ross in the firm’s New York office has been selected by Best Lawyers as the “Lawyer of the Year” in New York City Litigation – Construction law for 2016, the second-consecutive year he has been honored with this distinction. Only one lawyer in each practice area and city is given this honor. Lawyers are selected based on high marks received during the extensive peer-review assessments conducted by Best Lawyers each year.

Mr. Ross has more than 45 years of experience practicing law in the areas of construction, litigation and real estate. In addition to traditional legal work, he has developed a career in alternative dispute resolution in the construction industry, serving as an arbitrator, mediator and dispute review board chair. His previous honors include continual listings in Best Lawyers in America since 2006 and in Chambers USA: America’s Leading Lawyers for Business since 2008.

The Service-Disabled Veteran-Owned Business Act (the “Act”) was signed into law by Governor Andrew M. Cuomo on May 12, 2014. Under this new law, veteran business owners will be eligible to become certified as a New York State Service-Disabled Veteran-Owned Business (SDVOB). The goal of the Act is to encourage and support eligible businesses to play a greater role in the economy of the State by increasing participation in New York State’s contracting opportunities. Towards that end, New York will award 6 percent of state contracts to businesses owned by disabled veterans and create the new Division of Service-Disabled Veterans’ Business Development within the New York State Office of General Services (“OGS”) for the establishment of a statewide certification program. The Division will be responsible for certifying eligible SDVOBs, and assist and promote the compliance of SDVOB participation in the state’s procurement activities.

The statute provides that rules and regulations must be issued within 90 days of the effective date of the Act. However, understanding the strong interest in the program and the need to commence certifying businesses as soon as possible, OGS will be issuing emergency regulations on or before the week of June 2, 2014 prior to the adoption of permanent regulations.

Last January we reported on an expansion of public design build programs in New York as a result of legislation arising out of Governor Cuomo’s budget for 2012. At that time, New York expanded the number of agencies that were permitted to utilize design build procurement from two to five. Now with the Governor’s proposed 2013 Budget, the design build method will be made available to virtually all state entities, with the only exceptions being the New York City university and New York State university systems.

Of perhaps even greater interest is the current proposed legislation’s introduction of “design build finance” as an available capital procurement method. This device, which may entail use of private and public funds, or perhaps a combination of same, will be available to the same broad range of state public entities as design build will be.

Both procurement methods will follow the two-tier system involving short listing proposers to an RFQ followed by a selection based on best value to the state.

The proposed legislation (See “Public Protection and General Government” Article VII Legislation) can be found here, and a supporting memo here.

A New York State court judge in Albany rejected a Department of Transportation (DOT) requirement of a Project Labor Agreement (PLA) on a highway project on Route 17 in the Town of Wallkill, Orange County. In an Article 78 proceeding, which challenges the determinations of a public administrative agency, a non-union low bidder on the DOT project, who refused to enter into a PLA negotiated by the DOT and made a part of the bid documents, challenged the award which ignored its bid and went to the second bidder at an added cost reported to be $4.5 million. Because the DOT failed to demonstrate that the use of the PLA advanced the interests of the State’s public bidding statutes, the petition was granted. Barring an appeal, which is expected, the DOT will be required to re-bid without the PLA requirement.

The Association of General Contractors of America released its construction employment data for 2011, and, as expected, the overall construction market remains weak. Although construction spending between December 2010 and December 2011 increased by 4.3 percent, two of the country’s largest cities, Philadelphia and New York City, experienced sharp declines in their construction workforce. More specifically, out of the 337 metropolitan areas listed by the AGC, Philadelphia reported the largest job loss with a loss of 4,800 construction jobs, a 7 percent decline. New York City was a close second with a construction job loss of 4,600 jobs, a 4 percent decline.

On the bright side, Lake County-Kenosha County, Ill.-Wis., added both the most and the highest percentage of new construction jobs (33 percent, 3,900 jobs). Other areas adding a large number of jobs included Edison-New Brunswick, N.J. (3,700 jobs, 11 percent); Portland-Vancouver-Hillsboro, Ore.-Wash. (3,600 jobs, 8 percent); Louisville-Jefferson County, Ky.-Ind. (3,100 jobs, 13 percent) and San Jose-Sunnyvale-Santa Clara, Calif. (3,100 jobs, 10 percent).

Overall, construction employment increased in 148 out of 337 metropolitan areas between December 2010 and December 2011, decreased in 128 areas, and stayed level in 61 areas. Association officials said that recent developments in Washington that could lead to passage of long-delayed highway, bridge, transit and aviation investment legislation could give a needed boost to construction employment in many areas.

Design-Build project delivery has gained ground recently in New York. In a sweeping budget deal last month (December 2011), including provisions restructuring the personal income tax code, New York authorized certain state agencies to utilize design-build for road, bridge and other capital projects in excess of $1.2 million. The agencies benefitting from the deal include the Department of Transportation, Office of Parks, Recreation and Historic Presentation and the Department of Environmental Conservation. Awards are to be made on a “best value” basis to bidders from a prequalified list.

Contributors

Michael Barnicle is trial lawyer with a particular focus on construction and government contract litigation. Prior to joining Duane Morris, Michael served as an active duty government contracts and fiscal law attorney in the U.S. Army Judge Advocate General’s Corps. Read Michael's bio.